According to Exhibit 5.1, there are actually a variety of strike prices available on the Swiss franc. Use the strike prices and premiums quoted in the exhibit to answer the following questions.

a. If the current spot rate is 58.51 (cents/SF) and the first option strike price listed is a " 56 ," is the August 56 put option in the money or out of the money?

b. As the strike price of the put option rises from 56 upward to 60 , how does the August maturity put option premium change? Why?

c. What is the break-even exchange rate for the September maturity put option with a strike price of \(591 / 2\) ?

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Exhibit 5.1 Foreign Currency Option Quotations (Philadelphia Stock Exchange) Option and Strike Calls-Last Puts-Last Underlying Price Aug. Sept. Dec. Aug. Sept. Dec. 62,500 Swiss francs-cents per unit. 58.51 56 2.76 0.04 0.22 1.16 58.51 56 1/2 0.06 0.30 58.51 57 1.13 1.74 0.10 0.38 1.27 58.51 57 1/2 0.75 0.17 0.55 58.51 58 0.71 1.05 1.28 0.27 0.89 1.81 58.51 58 1/2 0.50 0.50 0.99 58.51 59 0.30 0.66 1.21 0.90 1.36 58.51 59 1/2 0.15 0.40 58.51 60 0.31 | 1 2.32 2.32 2.62 3.30 Source: Adapted from the Wall Street Journal.